Performance Management and Deficit Adjustment in U.S. Cities During the Recent Fiscal Crisis

Abstract

Performance management or PM has been promoted as a tool to transform government. Claims that PM will enable governments to “do more with less”, “increase efficiency”, provide “value for money”, and make “rational budget decisions” abound. Has PM helped city governments in the U.S. cope with the 2007 Great Recession? Theory suggests that PM can provide the informational and analytical foundation necessary for city officials to implement comprehensive but conflictive budget-cutting and revenue-raising strategies. By facilitating deep expenditure cuts and tax increases, PM can indirectly influence budget deficits. Using data from a national survey of city governments and multi-year audited city financial reports, the empirical analysis shows that PM cities favored what are essentially decremental responses to fiscal crises that lead to marginal changes in revenues and expenditures. Not surprisingly, there is no evidence that PM influences the size and change in budget shortfalls.